During the recession, it seemed that most financial executives at mid-market companies were doubling their money the old-fashioned way: by folding up available cash and sticking it back into the company coffers.
Now that the once-sluggish economy shows signs of picking up steam, mid-market executives are starting to spend. Findings from Deloitte Growth Enterprise Services’ 2014 Mid-Market Perspectives survey show that the majority of mid-market executives polled are confident that the economy will continue its slow but steady progress. The number of executives citing the uncertain economy as an obstacle to company growth has dropped from 59 percent last year to less than half (41%) in 2014. As such, they’re ready to invest in growth strategies such as adding jobs, moving forward with capital projects, and investing in technology.
Specifically the survey found:
- Thirty seven percent said their company increased its full-time staff and 43 percent expect their company to hire more over the next 12 months.
- Hiring and training came in second only to the development of new products and services as a top investment priority in the coming year.
- More than a third of the respondents said they will upgrade existing IT systems or implement new systems this year.
Make Profits, Not Price Cuts
In their book, The Three Rules: How Exceptional Companies Think, Deloitte researcher Michael Raynor and Deloitte’s chief strategy officer Mumtaz Ahmed suggested three ways for companies to achieve superior profitability.
Rule 1. Better before cheaper: Don’t compete on price, compete on value.
Rule 2. Revenue before cost: Drive profitability first through higher prices, then through higher volume, and only rarely through lower cost.
Rule 3. There are no other rules: View every decision through the lens of the first two rules.
Though larger, public companies tend to slash prices when profits come under pressure, Deloitte’s survey found nearly half of CFOs surveyed this year said new product development was a priority and that they’re not skimping on quality and don’t want to compete on price. The numbers break out like so:
- Less than 20 percent report frequently lowering price to keep business in response to customer pressure.
- Thirty seven percent report frequently finding new customers with greater willingness to pay.
- Only 26 percent cut price to maintain volume.
- Half say they invest in quality in order to increase volume.
A Fresh Face for Growth
Both talent and technology rose to the top of the priority list of mid-market executives’ growth strategies. Hiring and training was cited by nearly half (41%) of those surveyed, a 10 percent increase over those asked the same question this past fall.
All this interest in hiring hasn’t appeared to cause a shortage of skilled talent. Among those surveyed, few said they were having trouble recruiting new staff. That may be because companies are shifting the way they scout new hires. In a separate study, Deloitte found that 60 percent of those polled said they’d given their talent sourcing strategy a makeover, and replaced traditional teams with “talent acquisition” aimed at building their brand, using social media and leveraging internal referrals. Other engagement strategies include accessing talent through joint ventures, contracting, and freelancing.